Nike’s Digital Strategy: Embracing the Metaverse for Future Growth

QUESTION

What next steps would you recommend to Nike’s Digital Strategy Manager?

–              Recommendations for future implementation (what changes they should implement to gain customer confidence and stay ahead of the competition)

In 2017, Nike revealed its Consumer Direct Offense strategy, aimed at connecting directly with consumers via direct selling and digital innovation. In 2020, the pandemic forced the company to close 900 stores worldwide. However, the negative effect of store closures was more than compensated for by the growth in digital sales. In December 2020, Nike announced that it had recorded three consecutive quarters of 80 percent digital growth. As the pandemic continued worldwide, the company enjoyed double-digit growth in markets around the world: Europe, Asia- Pacific, Latin America, and China. It added 70 million digital members during the pandemic. In 2018, Nike had announced a goal to achieve 30 percent digital penetration by 2023. Spurred on by the pandemic, it achieved this goal by June 2020 and raised its digital revenue goal to 50 percent by 2022. In October 2020, Nike hosted a live stream product drop of Air Jordan 4 PSG shoes via SNKRS. Every single pair sold out in two minutes. In 2021, Nike’s Consumer Direct Acceleration aimed to increase digital sales with consumers, innovation, and investments in technology to enhance digital touchpoints. To that end, Nike acquired data platform Datalogue, to continue its quest for consumer-led digital transformation. Donahoe said that it “builds on our digital momentum by enhancing our ability to transform raw data into actionable insights in real-time and across the enterprise.” A trio of Nike apps— SNKRS, Nike Training Club, and Nike Run Club—drove tremendous value. The SNKRS app had been downloaded nearly 500 million times globally. The Nike commerce app regularly moves in and out of the top 10 retail apps globally, and through it, customers can shop for shoes, athletic wear, and more. A huge amount of Nike’s digital success can be attributed to its primary commerce app, and 150%+ growth in mobile sales in back-to-back recent quarters cements that. But it’s three other apps that actually weave Nike’s digital strategy together: SNKRS, Nike Run Club, and Nike Training Club. Nike’s initiatives in the Metaverse The company had been making several moves to enter the metaverse. Stepping in seemed to be a natural next step for a brand with such enormous reach and fan following. Nike played its cards close to its chest but made clear that it wanted to protect its brands and trademarks for the new metaverse era. A look at Nike’s job listings confirmed its growing interest in the metaverse. The company had posted positions such as “Virtual Material Designer, Footwear” on its digital product creation team. Nike had piloted several initiatives to explore the metaverse: Fortnite/Nike in-game brand integration. In 2019, Nike launched a digital sneaker in partnership with Fortnite. Two new characters in the game were revealed to be wearing Nike shoes, called skins, from the Nike Jordan brand. These shoes came in various colours: red, black, yellow, and purple. Fortnite, released in 2017, had roughly 250 million registered users. In 2020, Fortnight creator Epic Games struck a deal with the National Football League to bring virtual jerseys to Fortnite. Although the ingame integration would create great exposure for Nike to Fortnite’s massive user base, it wasn’t clear if Nike would share in the revenues from the skins, which cost between $13 and $18 for a pair. In December 2021, Fortnite announced a continuation of its collaboration with the Jordan brand, focusing on the iconic sneaker Air Jordan XI ‘Cool Grey’. CryptoKicks. Nike developed blockchain-compatible sneakers called CryptoKicks. The company established that a blockchain could be used to attach digital assets to a physical product, in this instance, shoes. Nike used blockchain to track the ownership and verify the authenticity of the shoes. Those who bought a pair of CryptoKicks received a digital asset attached to the shoes’ unique identifier. When the shoes were sold to someone else, ownership was transferred by trading the digital shoes and any related digital assets stored in a “digital locker”, a cryptocurrency wallet-type of app. Nikeland on Roblox. Nike signed a deal with Roblox to capture a younger audience by creating a virtual world called Nikeland on Roblox’s online gaming platform. Participants could use Nike-branded shoes and apparel to dress up their avatars, check out product offerings, and try out new products. Nikeland was modelled after the company’s Oregon headquarters and featured Nike fields and arenas for players to participate in various mini games such as Tag and Dodgeball and The Floor Is Lava. Nike wanted to observe and test which products appealed to a younger audience. If kids showed a desire for certain Nike shoes and apparel, the company would produce those in the real world. Trademarks for virtual sneakers and apparel. In late 2021, Nike filed to protect seven trademarks in the metaverse, signalling the company’s intention to make and sell virtual Nike sneakers and clothes. These included its name, the Nike swoosh logo, the “Just Do It” slogan, and the Air Jordan and “Jumpman” logos. Trademarks were a form of property that added value to the brand. Earlier, in April 2019, Nike had filed a trademark application for CryptoKicks, which Nike had planned to use as an NFT. Acquisition of RTFKT. In December 2021, Nike announced that it was acquiring RTFKT, a leading brand that designed digital sneakers and next-generation collectibles that blended culture and gaming. Nike CEO Donahoe said that it provided an opportunity “to serve athletes and creators at the intersection of sport, creativity, gaming, and culture.”14 With this acquisition, Nike took another step in its digital transformation and extended Nike’s digital footprint. Founded in 2020, RTFKT was a pioneering brand created to serve the growing community of digital creators. It leveraged the latest technology in NFTs, blockchain, and augmented reality to grow its brand in the metaverse by creating “one-of-a-kind virtual products and experiences”.

ANSWER

Nike’s Digital Strategy: Embracing the Metaverse for Future Growth

Introduction

As the Digital Strategy Manager at Nike, your task is to continuously evolve the company’s approach to digital innovation, ensuring customer satisfaction, and staying ahead of the competition. Over the years, Nike has successfully implemented its Consumer Direct Offense strategy, resulting in impressive digital growth during the pandemic. Now, the next steps must focus on embracing the metaverse and leveraging cutting-edge technologies to connect with a wider audience and capitalize on the virtual world’s vast potential.

 Strengthening Digital Presence and Touchpoints

Nike’s primary commerce app has been instrumental in driving digital sales growth. To maintain this momentum, focus on continuous app optimization, offering personalized experiences, and improving user interface and navigation. Regularly update the app with new features, seamless checkout options, and AR/VR capabilities for virtual try-ons. Implement a responsive customer support system within the app to address any queries promptly.

Building an Immersive Metaverse Experience

The metaverse presents an exciting opportunity for Nike to interact with its fan base in new and innovative ways. Nikeland on Roblox is a great initiative, but there is potential for more extensive metaverse presence. Collaborate with virtual worlds and gaming platforms, such as Fortnite, to design exclusive virtual sneaker collections and interactive experiences. Engage in-game brand integrations, making Nike products a desirable asset in virtual environments.

 Leveraging NFTs and Blockchain for Digital Collectibles

The introduction of CryptoKicks was a forward-thinking move. Continue to explore the potential of non-fungible tokens (NFTs) and blockchain technology to create virtual sneaker collectibles. Launch limited-edition digital sneakers as NFTs, allowing consumers to own exclusive virtual assets tied to Nike’s iconic designs. Conduct NFT auctions and collaborations with artists and influencers to boost brand engagement.

Enhancing Data-Driven Insights

Acquiring data platform Datalogue was a strategic move to gather real-time insights from consumer data. Continue to invest in data analytics and AI capabilities to gather valuable customer behavior and preference data. Utilize this information to personalize marketing campaigns, product recommendations, and customer experiences across all digital touchpoints.

 Protecting Brand Identity in the Metaverse

The recent trademarks filed by Nike for virtual sneakers and apparel indicate a commitment to safeguarding brand identity in the metaverse. Continue to pursue legal protection for Nike’s intellectual property in virtual realms. Collaborate with industry leaders and regulators to set standards for intellectual property rights in the metaverse.

Conclusion

Nike has been successful in its digital transformation journey, achieving remarkable growth through its Consumer Direct Offense strategy. To remain at the forefront of innovation and continue captivating its global audience, embracing the metaverse is the next logical step. Strengthen digital touchpoints, create immersive metaverse experiences, leverage NFTs, and protect brand identity to ensure customer confidence and outpace the competition. By focusing on these recommendations, Nike’s Digital Strategy Manager can drive the company towards sustained success in the digital age.